Public Bill Committee

[Mr. Mike Weir in the Chair]

Clause 42 ordered to stand part of the Bill.

Clause 43

Standards for handling complaints

Ian McCartney: I beg to move amendment No. 60, in clause 43, page 26, line 3, leave out ‘may make regulations prescribing’ and insert ‘must by regulations prescribe’.

Michael Weir: With this it will be convenient to discuss the following: Amendment No. 33, in clause 43, page 26, line 3, leave out ‘may’ and insert ‘shall’.
Amendment No. 34, in clause 43, page 26, line 5, leave out ‘may’ and insert ‘shall’.
Amendment No. 30, in clause 43, page 26, line 7, leave out ‘may’ and insert ‘shall’.
Amendment No. 73, in clause 43, page 26, line 9, at end insert—
‘(3A) The regulations must require a regulated provider to collate information on the number of complaints received by subject-matter of a complaint, or the description of a person making a complaint.’.
Government amendments Nos. 61 to 66.

Ian McCartney: Good morning, Mr. Weir. I shall make comments on the amendments tabled by the hon. Member for Hertford and Stortford (Mr. Prisk) and my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) and I shall explain in detail the purpose of amendment No. 60 and the consequential amendments Nos. 61 to 66. I hope that members of the Committee will first permit me to reiterate the intentions behind parts 1 and 2 of the Bill to set in context what the amendments are about.
The Bill is intended to introduce new measures to strengthen and streamline the current system of consumer advocacy and redress. Our vision of how that new model for consumer representation will work is centred on the case for the new National Consumer Council, which we debated at great length last Tuesday and Thursday, as a strong, independent consumer champion in a position to take a cross-sectoral approach to consumer representation across all markets.
Consumer Direct is an existing telephone and online advice service and has enjoyed considerable success in providing help and advice to consumers with inquiries and simple complaints. The service will be extended alongside the measures in the Bill to act as a first port of call for consumers in all sectors. It will help consumers in the energy and postal service sectors to progress their complaints about their service providers. 
When a service provider is unable to resolve a complaint to the satisfaction of the consumer, redress schemes in those sectors will ensure complaint resolution, as decisions made in the redress schemes will be binding on providers. The schemes will also be able to offer compensation or other forms of redress to consumers if they are warranted. The measures in the Bill are therefore about empowering and protecting the consumer.
The Government amendments will ensure that the regulated providers in the electricity, gas and postal service sectors have in place and operate appropriate and effective internal complaint handling procedures. Consumers will be assured of an approved standard of complaint handling by the regulated providers in the energy and postal services sectors, whoever those providers may be.
Under the new arrangements for consumer representation to be introduced as a result of the provisions of the Bill, there will no longer be a sector-specific consumer body with a complaint handling function for the energy and postal service sectors. Regulated providers in those sectors will be required to take full and proper responsibility for handling their own complaints, which means that service providers will need to take better ownership of complaint handling. It is important that the right incentives be put in place to enable that to happen. Regulated providers are, of course, entirely free to improve standards beyond the level prescribed by the regulator if they so choose.
Consumers will therefore benefit from getting their complaints handled effectively by the regulated service provider to an approved standard, but the regulated providers can also benefit. Recent research undertaken by Ernst and Young found that the retailers that are best able to resolve customer complaints quickly, satisfactorily and with the minimum of fuss are more likely to retain customers than those that do not.
Complaint handling standards have been debated extensively, and I believe that there is no difference between us on it. However, while we understand the intention behind hon. Members’ amendments, they would not fully achieve their desired affects. The Government amendments will place a requirementon the regulators to make regulations prescribing standards for complaint handling. Regulators are best placed to determine what is appropriate and necessary for their sectors, and they must be able to exercise a degree of flexibility in determining what standards should be set, to which complaints they should apply and how they should be enforced.
Amendment No. 61 allows for future changes in the energy and postal service sectors. It provides for the Secretary of State to make an order prescribing a date on which the duty on regulators to prescribe complaint handling standards will change to a power to do so. Before making such an order, the Secretary of State must consult the regulator, the new council and other persons as appropriate.
The amendment is required to allow for future changes in the energy and postal services market that may make the requirement for regulators to prescribe complaint handling standards obsolete. Any decision by the Secretary of State to remove the duty in question will be informed by representations madein the consultation and in particular the views ofthe regulator on the continuing need or otherwiseof the standards. For example, in the postal services sector the UK’s mail market was opened to competition only recently, on 1 January 2006. Over time, stronger competitive pressures might result in greater incentives for firms to deal effectively with consumer complaints in order to win or retain a larger share of the market. When all firms in the market meet or exceed the prescribed standards, the prescription of complaint handling standards might no longer be necessary. I am sure that hon. Members will recognise that that is in line with better regulation principles.
Amendment No. 73, in the name of my right hon. Friend the Member for Coatbridge, Chryston and Bellshill, raises a reasonable point: the need to ensure that regulated providers
“collate information on the number of complaints received by subject-matter of a complaint, or the description of a person making a complaint.”
I hope that I can reassure my right hon. Friend that that is provided for already in the Bill.
Clause 43(2) provides for the regulator to
“prescribe standards in relation to all consumer complaints, or...complaints of a kind specified”.
Clause 43(3) states that, complaints can be specified
“by reference to the subject-matter of a complaint, or the description of person making a complaint.”
Let us assume that standards prescribed apply to all complaints received. In order to comply with the relevant requirements detailed in schedule 5, and to provide the regulator with information regarding compliance, providers must record all complaints received and standards relating to them.
Schedule 5 to the Bill amends the ElectricityAct 1989, the Gas Act 1986 and the Postal ServicesAct 2000, to require regulators to collect information on compliance with standards, and gives the regulatornew powers to direct its regulated provider to do that. Clause 45 also places a duty on the new council to publish appropriate statistical information about levels of compliance by regulated providers with the prescribed complaint handling standards. For that reason, amendment No. 73 is unnecessary.
On complaints, in a previous sitting of the Committee, my hon. Friend the hon. Member for Ealing, North, raised the question of how complaints about the activities of the new council would be dealt with. The parliamentary health service ombudsman investigates complaints about Government Departments, their agencies and certain other public bodies in the UK accused of having not acted properly or fairly, or of having provided a poor service. The Bill makes provision for complaints about the activities of the new national consumer council to be subject to the same procedure. That is set out in paragraph 37 of schedule 1.
On the basis of my explanations, I hope that hon. Members, including my right hon. Friend the Member for Coatbridge, Chryston and Bellshill, will be minded to withdraw their amendments, in favour of the Government amendments, which have been designed to address all the issues raised in another place and this Committee.

Mark Prisk: Thank you, Mr. Weir. I, too, welcome you to the Chair for today’s deliberations.
Amendments Nos. 33, 34 and 30, which are in my name and that of my hon. and right hon. Friends, are probing amendments. I have to say, on this occasion, I am encouraged that that probing has generated that positive reaction from the Minister. We welcome the Government’s recognition of our view, which has been discussed here and in another place, of the need for effective complaint handling standards. I believe that that is essential for good business service, as he alluded to, and for meaningful reform of consumer redress.
Interestingly, the Government’s regulatory impact assessment relating to the amendments echoes that point. It argues that requiring companies in the energy and postal services sectors to adhere to complaints handling standards will ensure that more customer complaints are dealt with first hand by the regulated provider to the satisfaction of the consumer. So we are at one on the principle, which is very encouraging.
Our amendments seek to ensure that regulators put in place effective standards through the simple device of prescribing “shall” rather than “may”. However, I recognise entirely that, in content and on the nature of the powers provided, the Government’s amendments are more comprehensive, flexible and, indeed, more sophisticated. Again, the regulatory impact assessment recognises that we are dealing with standards and not procedures, which is important. I know that a number of players in the field are concerned about a prescriptive approach to procedures, so that is understandable. However, that is not what we are debating. The Government propose to establish standards. How each company responds to that will be up to them. Good companies with good procedures in place have nothing to fear from the amendments. On that basis, I am pleased that the Government have recognised the strength of the argument that we put both here and in another place, and I will be more than happy to support the Government amendments. I will not, therefore, press amendments Nos. 33, 34 and 30 or, in due course, amendment No. 36 to a vote.

Tom Clarke: Mr. Weir, I am grateful for the opportunity to speak to amendment No. 73. Let me start by agreeing with my right hon. Friend the Minister that amendment No. 75 is not necessary, not least because, so far as I can see, it does not exist. Before my right hon. Friend rises—

Ian McCartney: I am sitting down.

Tom Clarke: I am grateful. That was a test of Hansard, because I notice that last week the Minister’s jokes had “laughter” added after them. I look forward with interest to the next publication.

Ian McCartney: I apologise. I said 75 instead of 73 to see whether my hon. Friend was awake.

Tom Clarke: I am always grateful for my right hon. Friend’s support. He does not realise how appropriate that test would have been this morning.
Let us return to amendment No. 73, before we test your patience any further, Mr. Weir. That would insert:
‘(3A) The regulations must require a regulated provider to collate information on the number of complaints received by subject-matter of a complaint, or the description of a person making a complaint.’.
I am half convinced by what the Minister has said. However, those who advise me and, if I am not mistaken, Energywatch—if I am mistaken, I apologise—have not, in the absence of further information from my right hon. Friend, been convinced that the Bill is as explicit on those matters as we would wish it to be. Therefore, I offer this probing amendment. As I argued on Second Reading, in order to spot trends or weaknesses in the industries, the new NCC will need access to accurate, transparent data. However, as it will not be fielding most complaints, it will not be in a position to collate the data.
Clause 43 requires suppliers to deal effectively with complaints, and later clauses require information on such matters to be made publicly available. For example, clause 45 requires the new council to publish statistics on the compliance of suppliers, and clause 46 requires suppliers to communicate information tothe public. All of that is welcome. However, my contention, and the raison d’être of the amendment, is that there is nothing between those two to say that suppliers must keep track of the data needed to fulfil those requirements. If I am right, then when the NCC attempts to publish statistics on complaint handling, suppliers will be justified in saying that no records have been kept. Perhaps my right hon. Friend will clarify that later. I shall be glad to be told that I have got it wrong, in which case I will not press the amendment, but the point is worth putting. The amendment seeks to close the loophole, if it exists, and to ensure that reliable, transparent data will be provided to the NCC in order to facilitate evidence-based policy making by the new council. Some might ask why I seek to be so firm about suppliers. Let me be blunt. I do not believe that they have served the public well.
I am not alone in taking that view. A headline in this morning’s Daily Record reads:
“Power to the People. One million Scots could save £122 a year by ditching ScottishPower”.
Later on in the paper another supplier spends a full page telling us how inadequate Scottish Power is, particularly in providing information, the very point that my amendment seeks to address. In the leading article Ofgem’s Alistair Buchanan is quoted as saying:
“Competition is all about customer power.”
Well if it is, I welcome it, but I have not seen as much evidence of it as I would want to see. Alistair Buchanan continues:
“Any supplier that tries to buck the market by not lowering prices or failing on service risks an exodus of customers.”
My amendment seeks to ensure that suppliers act efficiently, competently, and keep information about who is complaining and what they are complaining about. That is absolutely reasonable. In order to givea political balance, indicating how the Committee’s thinking is perhaps ahead of the world outside, some of us might have seen in the tube last night last night the headline in the Evening Standard:
“Power rip-off hits millions. Regulator tells energy firms to cut their prices.”
Fine. As I said last week, I want the regulators to exercise the powers that they have and to be tougher in so doing. I have not seen the suppliers exercise their responsibility to consumers in a way that we are entitled to expect. Again the figures are given in both newspapers for the profits that have been made and the £4 million golden handshake that was given to the chief executive of Scottish Power.

Mark Prisk: I fully understand the point that the right hon. Gentleman is making about customer handling. But does he also recognise that the message from both those newspapers is that competition does have a role to play and that the combination of good procedures, or good standards in complaint handling, and good competition is important? Does he recognise the role that competition can play?

Tom Clarke: I would not dispute that. But as we have tried to ensure that competition—Ofgem might have been sincere in what it was seeking to do—more weight seems to have been given to the input from the suppliers than to the views of consumers. In the absence of the information which the amendment seeks—my right hon. Friend the Minister might be able to assure me that it does exist in the Bill—consumers are not being given the service which they are entitled to expect from the regulator. Their views ought to be represented. In that spirit I invite my right hon. Friend and the Committee to consider amendment No. 73.

Lorely Burt: I welcome you to another exciting day on this Bill, Mr. Weir. We are pleased that the Government have paid attention to the amendments tabled in another place requiring the regulator to prescribe standards for complaints handling. It should be noted that Ofgem and Postcomm were not very keen on this idea. But we certainly feel that it goes to the heart of the matter of whether companies themselves be able to have full control over all complaint handling. The right hon. Member for Coatbridge, Chryston and Bellshill mentioned earlier that although we have a requirement for competition, and competition will drive service, it is still not necessarily in the company’s interests to gold-plate service unless it will result in bottom-line profits. We support the amendment. The question is this: would redress schemes on their own be a big enough stick to force companies to raise their game?
The other question is do these companies have the physical ability to take on the extra volume of complaints when Energywatch and Postwatch are abolished? We saw stories in the press last week involving British Gas, which indicate that there are one or two problems that need to be addressed.
Amendment No. 60 is highly commendable, but amendment No. 61 seems to take back with one hand what the other hand has just given. It gives more leeway  than we would have wished to see. I take it from the Conservative Members that there is no desire to push this matter to a vote. However, we certainly wouldhave preferred if we could have voted separately onthe two amendments and we would have liked tosee amendment No. 61 not being implemented. Nevertheless, in the light of the conciliatory attitude from the Conservative Members, to push that amendment to a vote would be somewhat churlish.
We have supported amendment No.33, which the Conservatives tabled. I appreciate that the hon. Member for Hertford and Stortford is going to withdraw it, but we think that that amendment is the one that the Government should have made in the first place.
As far as amendment No. 34 is concerned, that is another proposed change from “may” to “shall”, which again we support. We think that amendment No. 30 is very important. It matters because Energywatch in particular keeps detailed records on complaints by categories and how complaints are broken down—the capture of that data in that way—is, we feel, very important indeed.
We certainly would support amendment No. 73, which was tabled by the right hon. Member for Coatbridge, Chryston and Bellshill. We feel very strongly that complaints data is useless until and unless it is broken down. So we would certainly support that amendment.

Ian McCartney: First, I again thank my right hon. Friend the Member for Coatbridge, Chryston and Bellshill for the passionate way in which he has pursued this issue. I hope to reassure him, not simply for the purposes of asking him to withdraw the amendment. What he has expressed, describing what has goneon and what continues to go on, shows a totally unacceptable situation. That is why in this Bill we have given such extensive powers regarding redress; that is why these amendments are set out in the way that they are. They incentivise the industry to clean up its act. If the industry does not do so, it will potentially face having to make, each day, compensation payments of significant amounts, along with the loss of reputation in a market place that is filled with alternative providers of the services that they seek to provide.
So it is important that, as we approach this subject in the way that we are, that we incentivise improvements; build on the good practice that exists, and, where good practice does not exist, create good practice and give the relevant powers to the regulator to do that.
The proposal improves the situation regarding both regulators and companies. We know, because both companies and regulators have been telling us during the consultation process and since, that great strides have been made in the sector to improve performance, and that improvement is set against a backdrop of difficult issues for the sector. For example, British Gas claims that the issues that it faces are due to migrating 14 million customers into a new billing system. As a consequence of that, we know that there have been substantial problems in the implementation of that system.
As the situation currently stands, there is little that customers can do but wring their hands. After this Bill becomes law, they can do more than wring their hands; they will have not only a complaints procedure, but, if the matter is not resolved, they will have a procedure that will allow them compensation, including financial compensation, for the failure to respond effectively to their complaint.
My right hon. Friend asked me to ensure that there is an umbilical cord between the provider, the regulator and the NCC. I want to reassure him on that point. [Interruption.] I know that it is a three-way umbilical cord, but I think that I am entitled to some licence. Clause 20 requires the new council to enter into co-operation arrangements with designated bodies such as the OFT, which supports Consumer Direct. That is intended to allow information about complaint numbers and trends to be sent to and used by the NCC. 
In each part of the process, whether involving a provider, a regulator or the NCC, information is important, not only for establishing trends, but to confirm whether there is compliance with the customer complaints processes and to identify the areas in which significant customer complaints are received for a particular company and what that company must do in conjunction with the regulator to resolve those issues. We also need to know the issues and trends that will require the NCC to improve complaint-handling processes and to improve and extend redress schemes. Information is a critical factor in ensuring that the system works effectively at all levels. My right hon. Friend is absolutely on the money on this issue, which is why I want to reassure him and why I took care in talking about his amendment to clause 43 and its relationship to schedule 5 and the relationship of those provisions to clause 20.
The purpose of the Bill is to put the building blocks together, which will show that ours is a comprehensive approach. As we move into the implementation phase, I assure the Committee that I will review all the points that are raised here. Whence they are raised is irrelevant; I aim to ensure that all the practical comments made here are reflected by the implementation of the proposals. Since the debate in the Lords, we have taken a great deal of time to consider the bringing forward of the amendments. I have acted in good faith. I thank the hon. Member for Hertford and Stortford for his kindness, although to extract a political point it was he who first took up the idea. We will not argue about that. The main thing is that there was a level playing field, in that everybody recognised the need for incentives. I hope that I have reassured my right hon. Friend the Member for Coatbridge, Chryston and Bellshill that there is a deliberate link between the different elements. I shall write to him during the development of the implementation strategy to discuss it with him in detail, so that he can be certain that what I am saying will happen in practice.
The hon. Member for Solihull made a criticism of the sunset clause—I think that that is the jargon that is used in the industry. I have a reputation for being in favour of red tape and bureaucracy, but that is not true. I never count employment rights and the minimum wage as red tape; they are reasonable, decent measures and I am pleased to say that I think that the party of the hon. Member for Hertford and Stortford now accepts that. Amendment No. 61 will merely facilitate market changes in the event of improved handling and complaints processes. There will be potential, after public consultation by the Secretary of State and if the regulation is redundant, to secure changes under the provision. That is all that the amendment will do. It is not a back-door policy; it will not undermine the principle set out in amendment No. 60, but it is a process that has been widely used, and reasonably so, in the last few years.
Until the hon. Member for Solihull made her remarks, I thought that there was a common purpose in regulatory matters and that if improvements in the market place made it clear that a regulation would become redundant, that should be accepted after consultation and an evidence-based assessment. Amendment No. 61 does not give with one hand and take away with the other, as the hon. Lady so luridly put it. I hope that with those explanations, hon. Members will accept my amendments and that we can proceed with improving the Bill.

Tom Clarke: My right hon. Friend is always remarkably convincing. Nevertheless, I hope he will agree that it was right for the Committee to take the opportunity of amendment No. 73 to give these issues an airing, even before we read the Daily Record and the Evening Standard.
I very much welcome my right hon. Friend’s description of how the Bill, if enacted, will be implemented, and I followed what he said about the umbilical cord. I also welcome what he said about information being a critical factor. It is at the heart of everything that we are trying to achieve and was the purpose of amendment No. 73.
In the spirit of generosity that is typical of the Committee, but consistent with the clear explanations given by my right hon. Friend and anticipating that the issue might emerge again when these matters are discussed on the Floor of the House, I will not press the amendment to a Division.

Amendment agreed to.

Amendment made: No. 61, in clause 43, page 26,line 14, at end insert—
‘(5A) If a date is prescribed in relation to a regulator for the purposes of this subsection, from that date subsection (1) has effect in relation to that regulator as if, in that subsection, for “must” there were substituted “may”.
(5B) In subsection (5A) “prescribed” means prescribed by order made by the Secretary of State under this section.
(5C) Before prescribing a date in relation to a regulator for the purposes of subsection (5A), the Secretary of State must consult—
(a) the regulator,
(b) the Council, and
(c) such other persons as the Secretary of State considers appropriate.’.—[Mr. McCartney.]

Clause 43, as amended, ordered to stand part of the Bill.

Clause 44

Requirements for making regulations under section 43

Amendment made: No. 62, in clause 44, page 26,line 28, leave out paragraph (a) and insert—
‘(a) set out the standards the regulator proposes to prescribe,’.—[Mr. McCartney.]

Clause 44, as amended, ordered to stand part of the Bill.

Clause 45

Information with respect to compliance with complaints handling standards

Amendment made: No. 63, in clause 45, page 26,line 37, leave out ‘where standards are’ and insert ‘in relation to standards’.—[Mr. McCartney.]

Clause 45, as amended, ordered to stand part of the Bill.

Schedule 5

Information relating to compliance with complaints handling standards

Amendments made: No. 64, in schedule 5, page 61, line 16, leave out ‘where standards are’ and insert ‘in relation to standards’.
No. 65, in schedule 5, page 61, line 32, leave out ‘where standards are’ and insert ‘in relation to standards’.—[Mr. McCartney.]

Schedule 5, as amended, agreed to.

Clause 46 ordered to stand part of the Bill.

Clause 47

Membership of redress scheme

Mark Prisk: I beg to move amendment No. 32, in clause 47, page 27, line 19, leave out paragraph (b).
This simple, probing amendment would remove the Secretary of State’s administrative role when setting up a redress scheme and leads to a single, simple question for the Minister: will he explain why the Secretary of State would need to directly administer a scheme? It is important that redress schemes are approved by a local regulator, but it is also important that they are independent of central Government, and are seen to be such. Therefore, could the Minister explain why the Government deemed it necessary to be so involved, directly or indirectly, in the administration of redress schemes? What exactly could the Secretary of State do that the regulator could not?

Ian McCartney: I thank the hon. Gentleman for the spirit in which he moved his amendment. I accept that it is a probing amendment, and I hope that my response will explain fully the intention of clause 47. If he has any further questions to put to me, I will respond to them, and I hope that he will then feel able to withdraw his amendment.
The amendment relates to clause 47 and the redress provisions in this part of the Bill. The clause will introduce a power for the Secretary of State to require service providers in the energy and postal services sectors to belong to a redress scheme. It will, in effect, give consumers in those sectors greater assurance of achieving certainty in the resolution of complaints. So that there is no doubt, I will explain how the measure will work in practice.
Under the Bill, the Secretary of State will be given the power to make an order that requires regulated service providers in those sectors to belong to an approved redress scheme. If minded to exercise the power, the Secretary of State can consult the relevant regulator and others who represent those with an interest in the matter.
The purpose of that consultation includes the need to obtain confirmation of sectoral redress requirements and to look at the appropriate scope of the redress schemes. The Bill stipulates that, before making such an order, the Secretary of State must be satisfied that there is at least one qualifying redress scheme that regulated service providers can join or that such a scheme will be in existence when the order comes into force. That is critical. Parliament, through the Secretary of State, has a role to play in this. Having set out the principle of redress schemes in the Bill, it must ensure that they are established in practice and within the context of the clauses on the standards expected of the schemes.
It is worth emphasising that we have no reason to believe that at least one suitable scheme for each sector will not be established by industry. However, we need to cover all eventualities, and in the highly unlikely event of a scheme not being established by industry, the clause contains provision for the Secretary of State to establish one. That is also critical, as it is Parliament’s role. There is all-party consensus on establishing redress schemes on behalf of the consumer. Therefore, we must take responsibility in extreme circumstances—and they would be extreme—to make sure that a redress scheme is established. Hence clause 47(1)(b) allows for the establishment of a redress scheme administered by the Secretary of State or by a person appointed by him. That will provide an additional guarantee that a qualifying redress scheme will exist for regulated providers in the energy and postal services sector, to comply with an order made by the Secretary of State.
To be perfectly clear, under these provisions, the term “redress scheme” holds the same meaning regardlessof whether it is established under clause 47(1)(a) by industry and approved by a regulator, or underclause 47(1)(b) and administered by the Secretary of State or by a person appointed by him. Hon. Members can rest assured that, if it were necessary for the Secretary of State to use the fall-back provisions contained in clause 47(1)(b), there would be no compromise over the need for the independent person to be independent. It would still be possible for consumer complaints to be made to, and investigated and determined by, an independent person. That would be based on the principles set out in the legislation.
Clause 47(7) provides that, in designating a scheme in relation to regulated providers under clause 47(1)(b), the Secretary of State must be satisfied that the scheme meets the same criteria for approval by a regulator as those set out in clause 49. The important assurance that the hon. Gentleman wants is that, if the Secretary of State were to establish a scheme in extreme circumstances, it would not be—in popular parlance —a Mickey Mouse scheme; in all respects, it must at  least be compatible with a scheme established under clause 47(1)(a). Therefore, I can say with certainty that this provision is not a stop-gap to fulfil in practice what is set down in the Bill.
The clause will not provide the Secretary of State with the power—if ever it had to be exercised—to provide a second-class or third-class scheme, or a scheme that complies with the law but not with the spirit of the law. It is very important that, if we have to do this in extremis, we do it on the basis of fulfillingthe commitment in the legislation to ensure that all consumers in those sectors are covered by a redress scheme. I hope that, given that assurance, the hon. Gentleman will be minded to withdraw his amendment.

Mark Prisk: I am grateful to the Minister for his remarks. I would not imagine for a moment that the current Secretary of State would organise a Mickey Mouse redress scheme, and I am delighted that the Minister has confirmed that.
The main point is the use of the word “administered”. If the word “established” had been used, there would have been no concern in my mind. I agree with the Minister that, quite understandably, if we wish to have redress schemes, we must ensure that the Government can put them into practice if they exist. Therefore, I understand the use of the word “administered”, but I am not entirely sure whether the Department would wish to run such a scheme directly, although the Secretary of State reserves the power to appoint someone else to run it for him That was the essence of my inquiry.
However, I was assured by the fact that the Minister made it absolutely clear that the provision would be used only in the most extreme circumstances where,for whatever unforeseen reason, such a scheme wasnot available. Having wished it to occur, it would be peculiar if the Government were unable to put that wish into practice, having legislated for it. Therefore, on that basis and having had that clarity put on record, I am more than happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Lorely Burt: I want to probe the Minister a little and get one or two assurances from him. Liberal Democrat Members are a little worried about multiple redress schemes, which, among commercial entities, may prompt a race to the bottom. Therefore, we are interested to know what the rationale is and how the Government will ensure that, if there are multiple redress schemes, they can adhere to a good minimum standard, to ensure that there is no race to the bottom.
We would like to know whether there will be an ombudsman scheme. We understand the logic in having the scheme for gas and water supplies, but we have one or two concerns about the Post Office, because the typical redress offered by the Post Office is a bookof first-class stamps. Given that the ombudsman or redress scheme will require evidence to demonstratethe problem, we are stretching our imagination to understand what the evidence might be in such small-scale complaints or problems that might apply. For example, if the Post Office has not delivered a parcel, will someone need proof of posting? If the Post Office is closed, must someone stand in front of the CCTV and wave an envelope around before popping it into the post box as proof of posting?
If we are promising a redress scheme, people have the right to expect a redress scheme. We are getting rid of watchdogs, so redress schemes will have to be really good. Can the Minister perhaps give an example of a suitable redress scheme that might apply in the circumstances that I have outlined?

Ian McCartney: I thank the hon. Lady for her question. I would like to point out that we are not getting rid of watchdogs; we are creating a new, more effective independent one. For the first time, all sectors will have redress schemes. What is the point of having a watchdog with no teeth?
The Liberal Democrats are strangely wedded to maintaining the old system on the basis of “Well, that’s what’s there”. Actually, we believe that a great deal of improvement can be made in all the sectors, and that is why, for the first time, there will be at least one redress scheme per sector—a redress scheme and regulator with teeth and a new body representing consumers, also with teeth.
The Bill leaves open the possibility of a regulator creating just one scheme for each sector. Of course, we have set out and debated the high standards that will apply, so no Mickey Mouse schemes will get in under the radar, as I put it in the last discussion. No schemes will be set up in any of the sectors that do not meet and operate to the standards set out. That is important. Our policy preference is for one scheme per sector, but we cannot prescribe that because it will be a matter for the regulator, and rightly so.
Circumstances might change in years to come to facilitate more than one scheme in a particular sector. Changes might take place in the market for which the current arrangements are inappropriate and act as a barrier to other entrants to the market. Amendments might, therefore, need to be made. That is the reason for the flexibility—not to rush downwards, as thehon. Lady said, but to ensure that, in a changing marketplace, consumers’ rights are always paramount. Changes made in the future will improve people’s rights, not undermine them. That is important.
Rest assured, the clause will establish an essential means of ensuring effective schemes covering all sectors in the Bill and, hopefully, after 2008 and further consultation, the water industry as well. I hope that, well before 2008, those schemes will be operating effectively. I hope that those explanations have helped the hon. Lady with her concerns.

Question put and agreed to.

Clause 47 ordered to stand part of the Bill.

Clause 48 ordered to stand part of the Bill.

Clause 49

Approval of redress schemes

Mark Prisk: I beg to move amendment No. 35, in clause 49, page 28, line 40, leave out ‘relevant’.
This is a very simple probing amendment focusing on the meaning of the word “relevant”. My purpose is to clarify what a “relevant consumer” is. To my mind, all consumers who use energy supplies are relevant where redress schemes are concerned. Will the Minister tell us, therefore, who are not “relevant consumers”?

Ian McCartney: I accept that this is a probing amendment, and I hope to give a detailed response to help hon. Members.
Amendment No. 35 relates to redress schemes under clause 49 and the matters that a regulator must take into account prior to approving a redress scheme in its sector. The interests of “relevant consumers” is one of the aspects that a regulator is required to consider when approving a redress scheme. By deleting the word “relevant”, the amendment would require the regulator to have regard to the interests of consumers in general when dealing with the regulator’s regulated providers, instead of to those specified as “relevant consumers” in the second column of the table in clause 42.
“Relevant consumers” of the regulated providers listed in clause 42(1) are defined in the Bill. For gas supply licences, it is:
“A person who is a consumer in relation to gas supplied by a gas supplier (within the meaning of Part 1 of that Act)”,
or, on transportation licences:
“A person (other than a gas licensee) who is a consumer in relation to services provided by a gas transporter (within the meaning of Part 1 of that Act).”
I think that the second definition was an amendment in another place following a cross-party debate.
For electricity supply licences, it is:
“A person who is a consumer in relation to electricity supplied by an electricity supplier (within the meaning of part 1 of that Act)”,
or, on distribution licences:
“A person (other than an electricity licensee) who is a consumer in relation to services provided by an electricity distributor (within the meaning of Part 1 of that Act).”
For postal services, it is:
“A person who is a consumer in relation to relevant postal services”
within the meaning of section 41 in part 2 of the Postal Services Act 2000. For water, it is:
“A person who is a consumer in relation to services provided by a water undertaker, sewerage undertaker or licensed water supplier in its capacity as such.”
There is no intention to attempt to limit or exclude any particular consumers in the sectors to which the redress provisions are to apply—the energy and postal services sectors. The main point to note is that the provisions are to be applied by more than one regulator, so each will be required to take account of the interests of relevant consumers in relation to its regulated providers. The expression “relevant consumer” refers to the consumers identified in the table inclause 42, as I have just explained.
Orders made by the Secretary of State concerning membership of a redress scheme introduced under clause 47 will be binding on regulated providers. It follows that the consumers in a position to benefitfrom the introduction of the redress provisions will be those who qualify by virtue of the fact that they are consumers of services supplied by those regulated providers. They are the relevant consumers whose interests a regulator must take into account when deciding whether to give approval for a redress scheme. I hope that that explanation will provide clarification for the hon. Gentleman and encourage him to withdraw the amendment.
We expect that service providers will establish their own redress schemes, which will be funded by their members. The members of the schemes will decide and agree on their funding structures, but we expect that they are likely to follow a pattern similar to that of existing redress schemes whereby a subscription fee is levied, typically based on the size of a firm or its turnover, coupled with a case fee payable by each member for every case referred to the scheme. The scheme is then free to consumers.
The redress schemes are expected to operate on a cost recovery basis. General practice is for fees to be set at a level that covers the costs of the scheme, based on the anticipated number of complaints. Fees can then be reviewed regularly and adjusted to reflect any differences between the actual number of complaints received and the estimated level of complaints.
Similarly, any scheme administered by the Secretary of State would operate purely on a cost recovery basis and could not be profit-making. Any subscription costs or case fees charged to members of a scheme would be set and periodically adjusted only to cover the costs of running the scheme. I hope that that provides additional clarification. The schemes will not be profit-making enterprises; fees will cover their costs to ensure that they are free in all circumstances to the consumer who wants to make a complaint and have it dealt with effectively.

Mark Prisk: That was a thorough, comprehensive exposition and will be helpful. A number of people who are following our deliberations wanted clarity on the matter, and the Minister was extremely helpful. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 49 ordered to stand part of the Bill.

Clause 50

Approval of redress schemes: supplementary

Mark Prisk: I beg to move amendment No. 39, in clause 50, page 30, line 25, leave out from ‘scheme’ to end of line 26.
Clause 50(4) reads:
“A regulator may, in accordance with section 51, withdraw its approval of a redress scheme,”
but goes on to say that it
“may do so generally or in relation to consumer complaints of a description specified by the regulator.”
The purpose of this probing amendment is simply to establish on what basis a regulator might withdrawits approval of a redress scheme. The wording of the subsection is a little unclear, and for the sake of the record it would be helpful if the Minister couldclarify it.

Lorely Burt: Our understanding is that the amendment is intended to remove the flexibility of the regulator to withdraw general or specific parts of a scheme. I have a deep and dark suspicion that the Minister will say that it is important to keep the flexibility so that the scheme might run as well as possible, and I have a great deal of sympathy with that. However, will he provide an example of how some of a redress scheme could work, but not all of it?

Ian McCartney: I thank hon. Members for their comments and questions.
Amendment No. 39 relates to the redress scheme approval provisions of clause 50, and the discretion available to a regulator in considering the withdrawal of approval for a redress scheme. Circumstances might occur that make it necessary for a regulator that has given approval for a redress scheme to operate to consider withdrawing that approval. The Bill allows for a regulator to have the option either to withdraw approval from a whole scheme or to do so in relation to a specific type of consumer complaint. The hon. Lady was right to say that it is the Government’s view that the regulator must have the flexibility necessary to protect consumers.
Those circumstances could include problems in the operation of the scheme, including processes, service standards, outcomes of cases or other issues affecting its effectiveness. Other circumstances might arise in future, such as the introduction of new regulations that guarantee automatic compensation in respect of certain types of complaint, resulting in less need for the redress scheme to focus on a particular class of complaint. That takes us back to a point made bymy right hon. Friend the Member for Coatbridge, Chryston and Bellshill in amendment No. 73. For the measure to work in practice, information is required on, for example, service standards; the outcomes of cases; the interaction between the processes and the individual consumer who makes a complaint; and, in later years, complaints of such a nature that they will be guaranteed automatic compensation. The redress scheme will then be able to concentrate on thedifficult, complex cases that need to be resolved in an effective way.
The effect of the amendment would be to removethe discretion to withdraw approval in relation to consumer complaints of a specified description. That would not be helpful for consumers, because it would remove the flexibility that regulators require to ensure that schemes operate effectively on their behalf. Redress schemes are about advocacy and achieving appropriate compensation—whatever it might be—for the consumer. Therefore, we have to be absolutely diligent in the way in which we operate schemes, and must be able to effect change if change is required.
I understand that the amendment is intended to be a probing measure, but I have to say that being obliged to take a blanket approach to the withdrawal of approval for a scheme would risk disadvantaging consumers in areas in which the scheme is operating satisfactorily. That goes to a point made by hon. Lady. On occasions, a scheme might not operate effectively in a specific area, and the regulator will decide that improvement is required. It would be nonsensical to have to withdraw that scheme in areas in which it operates effectively. That would mean that thousands of genuine complaints were not resolved effectively and the scheme would be brought into disrepute. In addition, it would be unfair on the companies that were paying for it to work; they would have a way of resolving disputes but would not be able to use it, so would become the butt, as it were, of complaints because complainants would have nowhere else to go to. Flexibility is important so that schemes can operate satisfactorily and the regulator can change anything that is unsatisfactory to resolve issues.
In deciding whether to approve a redress scheme, a regulator must consider a number of factors, such as the provisions of the scheme. We must ensure that those include the interests of consumers and generally accepted principles of best practice. Having given approval for a redress scheme covering complaints in a range of categories such as billing, customer service and metering, a regulator might need to withdraw approval in respect of just one aspect of it. For example, a change in technology might mean that the service being provided for a particular category of complaint no longer met all the conditions on which approval had been given. It would, therefore, have to change. This is about keeping up with changes in a way that is not detrimental to the consumer who has a legitimate complaint that needs to be resolved. The amendment could also result in putting members of that scheme who would have a statutory requirement to belong to an approved scheme at risk of being in breach of that requirement if they are unable to find an appropriate alternative scheme to join.
I hope that my explanation helps the hon. Lady and the hon. Gentleman to understand why the clause is so drafted.

Mark Prisk: The Minister has given us a comprehensive explanation of the clause. The key word is “flexibility” and he was right to emphasise it, particularly in some of his later remarks. It will be helpful to those who want to understand how the measure will work and the circumstances in which it will apply. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 50 ordered to stand part of the Bill.

Clauses 51 and 52 ordered to stand part of the Bill.

Clause 53

Membership of redress schemes

Question proposed, That the clause stand part of the Bill.

Michael Weir: With this it will be convenient to discuss the following:
New clause 2—Standards of competence
‘(1) Section 22 of the Estate Agents Act 1979 (c.38) (Standards of competence) is amended as follows.
(2) For subsections (1) and (2) substitute—
“(1) The Secretary of State will by regulations made by statutory instrument designate any body of persons as an approved body to which people engaged in estate agency work, including both the sale and lettings of residential property, must belong.
(2) The approved bodies must make membership conditional on signing up to rules and codes of conduct, which will—
(a) prescribe minimum competency standards;
(b) ensure that firms have adequate professional indemnity insurance and, as appropriate, clients money protection insurance;
(c) require a minimum level of professional development per year; and
(d) require membership of a redress scheme.”.’.
New clause 4—Monitoring by Office of Fair Trading
‘(1) The Estate Agents Act 1979 (c. 38) is amended as follows.
(2) After section 22 insert—
“22A Monitoring of compliance by Office of Fair Trading
(1) An estate agent shall be obliged to register with the OFT and shall provide such information as the OFT may require.
(2) The Secretary of State shall prescribe a scale of fees to be charged to estate agents for registration.
(3) The OFT shall establish, or shall cause to be established, a unit to monitor compliance with the provisions of this Act and this unit shall have powers to make reasonable requirementsof estate agents to ensure compliance with the provisions ofthis Act.
(4) In pursuance of subsections (1) and (3), the OFT—
(a) shall require estate agents to certify that they comply with the provisions of this Act and any code of practice to which they have subscribed;
(b) may require an estate agent to produce any records or information and to co-operate in any investigation; and
(c) may conduct or commission investigations and surveys to monitor compliance with the Act.
(5) Failure to comply with any requirement made by the OFT under this section shall be an offence punishable on summary conviction by a fine not exceeding level 5 on the standard scale.
(6) This section comes into force 18 months after the date on which the Consumers, Estate Agents and Redress Act 2007 receives Royal Assent.
(7) In subsection (2) above “prescribe” means prescribed by the Secretary of State by order made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament.”
(8) In section 30(2) (orders and regulations), after ‘22’ insert ‘and 22A’.”.’.

Lorely Burt: Thank you, Mr. Weir. I shall speak first about new clause 4, which would require estate agents to register with the Office of Fair Trading. It is likely that for estate agents the ombudsman will be the only redress scheme in this place. At present, about 70 per cent. of estate agents are members of, and licensed for, the redress scheme for home information packs. As the ombudsman is doing a very attractive two-for-one offer at the moment, it is likely that by the time the Bill has completed its proceedings the vast majority will be members of the scheme.
Despite the Minister’s comments earlier, the Liberal Democrats reiterate our concern about competition for redress schemes and the possible danger of a race to the bottom. However, we do not want to press that argument, because we take the Minister’s point.
The proposal is about two important things: first, positive, as opposed to negative, licensing. It is important that a service should be good from the beginning; it is not appropriate to wait until one has to pick up the pieces when things go wrong.
Secondly, it is about actively looking for compliance. The proposal will facilitate things such as mystery shopping exercises. Consumers will not necessarily know if they have been misadvised. For example, there may be interests that the seller of a property may not be aware of, when a lower price than might otherwise have been achieved is recommended. Unless there are individuals such as mystery shoppers and an active, positive constraint on how estate agents practice, the vast majority of misdemeanours and mishandling against the interests of the consumer may never come to light.
As drafted, the Bill will catch the absolute fraudsters but not the majority who mislead customers in what for most people is the biggest purchase of their lives, involving what to them is a very large amount of money. We feel that this is more important than how much the fine should be when those individuals are caught, which is covered by amendments 26 to 28. I remind the committee that this was originally drafted with a Labour colleague and was based on an amendment that we drafted in collaboration with a Labour colleague. We would, therefore, like to ask the Minister to reflect on how consumers will know if they are being ripped off and losing thousands of pounds unless there is a positive requirement for someone actively to look at this.
The new clause 2, which is proposed in my nameand the name of others, similarly relates to positive licensing as opposed to negative. Here, we give the Secretary of State the power to designate a body of persons as an approved body to which estate agents must belong, as opposed to the Office of Fair Trading. This does the same thing, but in a different way.
This amendment was first tabled in another placeby the Earl of Caithness. It does two new and very important things. It broadens the scope of the Bill to incorporate lettings and, in subsection (2), it lists the things that an estate agent—or a member of a scheme—would have to do to be eligible to join. This includes vital things like professional indemnity insurance; a minimum requirement for professional development; and minimum competency standards. This introduces—

Tom Clarke: I listened carefully as the hon. Lady made her case. How would that minimum competency be determined and who would determine whether it met those standards?

Lorely Burt: The idea behind including a minimum competency standard is that compulsory training could be introduced, but in a flexible way. I think that it would be for the industry to determine what those compulsory, but minimum standards ought to be.
The National Association of Estate Agents fully supports this new clause, because it creates a level playing field and empowers and encourages the good estate agents and attempts to weed out the bad. The Government have previously made some encouraging remarks. They have said that they will look at this. Has the Minister had an opportunity to reflect further and can he give us any assurances?

Mark Prisk: The new clauses cite the arguments in favour of positive licensing. If I may, I would like to address them both.
The new clause 2 seeks to introduce higher standards of confidence by requiring all of those who trade as estate agents to be a member of an approved body or a trade organisation. While I wish—as does the hon. Lady—to root out rogue estate agents and give greater confidence to homebuyers and vendors, I have some reservations about this approach. I should also preface my remarks by reminding members of the Committee that I am a member of the Royal Institution of Chartered Surveyors. I suspect that this is one of the organisations that the hon. Lady has in mind in terms of the membership aspects of the new clause.
My first concern is that a members-only industryhas the potential to create a barrier to entry for new players. After all, as it stands, the new clause specifically requires firms to meet certain standards that would require training and management procedures to be in place. The principle of that is fine, but there are difficulties for new entrants.
Secondly, the new clause 2 requires that appropriate professional indemnity insurance be secured. As anyone who has traded in this market will know, itcan be extremely difficult for a professional firm, particularly a new entrant, to secure insurance. It is especially difficult for a new entrant to demonstrate the track record on which the provision of insurance is often dependent.

Lorely Burt: I am afraid that the hon. Gentleman’s comments are not reassuring to me or to the many other people who have suffered at the hands of estate agents. The thought that one can receive a service from a new entrant to the market who is not required to have a qualification and who has no insurance to provide for things going wrong is not reassuring. Those should be minimum standards of entry for anyone who professes to give advice to someone for the biggest purchase of their life. If that is a barrier to entry for people who are uninsured and untrained to give such advice, what other measures would enable an individual to approach an estate agency with confidence?

Mark Prisk: I shall clarify that point for the hon. Lady. Her new clause seeks specifically to have a requirement for membership of a trade organisation. That is a separate, although important, matter from having a qualification or having gone through a training procedure. It is important to understand the implications of the new clause. Of course we want to ensure that people come into the industry with the right approach and from the right background, but to require them to be a member of an organisation and already to have indemnity insurance is to set an unrealistic standard.

Stephen Pound: The hon. Gentleman knows far more about the subject than I do, but from the perspective of the semi-literate layman,it appears that the new clause would create a self-regulating cartel, which would be anti-competitive. From the standpoint of his personal knowledge, will he either disabuse me of that notion or confirm me in my prejudice?

Mark Prisk: I always hesitate to disabuse the hon. Gentleman. In this instance, I am happy to say that much of what he says, albeit in more colourful language than I might cautiously use, is absolutely right. There is a danger that, under the new clause, it would be difficult for new entrants to come into the market. I have always taken the view that the consumer is often well protected if there is good competition and turnover. If there is a requirement for new entrants to be members of an organisation—there might be several, such as the National Association of Estate Agents, the Royal Institution of Chartered Surveyors or others that the hon. Member for Solihull might have in mind—we could end up with a cartel, as the hon. Member for Ealing, North, said.

Lorely Burt: I still do not feel reassured, particularly by the idea that a new entrant to an industry can set up with no insurance whatever. There is an assumption that competition will create some kind of standard of service. I ask the hon. Gentleman to reflect on how that can be achieved, because it seems to me that the more people who vie for a customer’s attention, where the customer is a naïve—nay, semi-literate—individual—

Michael Weir: I remind the hon. Lady that interventions should be brief.

Lorely Burt: I am sorry. I am taking too long.

Mark Prisk: I was not sure what the end result of that intervention was going to be. I shall be fair; the new clause has serious drafting weaknesses, but I shall look at the intent behind the words. The aim, quite rightly, is to rule out rogue estate agents. The hon. Lady’s chosen method is by setting higher standards of confidence. My concern is that that is perhaps the wrong way to try to tackle the problem.
Let us be very clear who we are talking about. The rogue estate agent—that is who we want to tackle—is often a cunning and canny individual. They know perfectly well how to work their way around the membership rules of professional organisations. So, simply setting new rules will not stop them. I share the hon. Lady’s desire to tackle them and root them out of the industry, both from the industry’s point of view and, more importantly, from the consumer’s point of view.
However, I think that the unintended consequenceof this particularly restrictive new clause would be to further burden the law-abiding firm with just more paperwork and costs. In that sense, this sort of members only approach is trying to tackle the root of the problem through competence, when, in truth, the real issue is ethics, not competence. Ethics is the issue that we must address. That is why I do not feel that this new clause is one that I can support.
New clause 4 similarly seeks to tackle the issue through the route of positive licensing. There is a perfectly reasonable aim behind it, as there is with the hon. Lady’s new clause. There are some pretty dreadful practices undertaken by a minority, but nevertheless undertaken by some estate agents, and we must consider how we deal with that. Having said that, I would like to commend the work of the Office of Fair Trading and the many local trading standards officers who police the industry. I would also like to commend the work of Which?; it has also sought to expose rogue estate agents and it is right to continue that work. The key point here is this: how will the powers of the Bill and the legislation that it seeks to amend help us to tackle, catch and rule out rogue agents?
Therefore, although I applaud the sentiment that lies behind the two new clauses, the real issue is how we deter such people from entering the industry; we will debate serious fines later on, if we catch your eye, Mr. Weir. Also, how do we stop those rogue agents from continuing? I must say that the approach that the two new clauses advocate—the approach of positive licensing—is one that I am not convinced about.
First, mandatory registration with the OFT would only work if the OFT has the means to screen all the businesses thoroughly. Clearly, past criminal records can be identified when the Home Office—what remains of it— is actually working, but what other information would be required for such registration to be meaningful?
Secondly, the rest of new clause 4 merely seems to restate the provisions that are in the Estate AgentsAct 1979, or indeed in the Bill; for example, the issue about a liability on maximum fines for some reconvictions.
I am not saying that there is not a case for raising standards; there is. I am not saying that there is not a case for trying to change practices, in order to make it harder for rogue agents to do what they do. However, I am just not convinced that the measures outlined in new clause 4 are adequate.
What matters is what the Government’s approach is going to be. We need to know whether there will be a clear commitment from the Minister, and therefore from the Government, to ensuring that the OFT and the trading standards officers will have the ability and the resources to crack down on rogue agents. I know that the Minister has made that commitment clear on Second Reading. However, what we need to understand better are the Minister’s views as to whether he thinks that any form of positive licensing would be something that he could support.

Ian McCartney: I will give a detailed response to the hon. Member for Solihull. This is one of those clauses that deals with a genuine issue that, for many years, people in the political field, the professions and consumer advocacy bodies have spent a great deal of time investigating. In some instances, they have been able to expose acts that are totally unacceptable in undermining the individual consumer.
It is important to consider the issues related to what people call positive licensing, and the alternatives to it. I tend not to use the phrase “positive licensing” myself. Why? It gives the impression that, if there is a genuine alternative, that alternative is a negative approach. In drafting the Bill, I wanted to do the best by the consumer and those elements in the industry—the overwhelming majority—that want to support good practice and open up the transparency of relationships within the industry to protect not only their reputation but their ability to work effectively in a marketplace, providing goods and services, against a minority of people who could have a disproportionate effect on the purchase of a property because of their unacceptable conduct in the running of their business and their relationship with their client.
I hope that I can explain in detail the intellectual thought processes behind our approach to this and its evidential base. I know I will not be able to persuade the hon. Lady, who has a legitimate view about she would like us to proceed, and nor am I attemptingto do so. She may want to divide the Committee. However, I shall give her a detailed response which will try to set out the reasons why we are doing this in the way that we are and not in a way that people would describe as “positive licensing”.
Clause 53 gives effect to schedule 6, which makes provision for the Secretary of State to make an order requiring all persons who engage in estate agency work in the United Kingdom to belong to an approved redress scheme. Schedule 6 sets out the detail of the estate agents’ redress scheme provisions and how they will be enforced. More specifically, it enables the Secretary of State to make an order to require persons engaged in estate agency work in relation to residential property to be members of an approved redress scheme. It allows enforcement officers to issue penalty charge notices if an estate agent is in breach of the duty to be a member of an approved redress scheme. It requires enforcement officers to inform the Office of Fair Trading of estate agents not complying with this duty and finally it defines “residential property”. Clause 53 also amends section 3(1) of the Estate Agents Act 1979, so that not belonging to an approved redress scheme will become a ground for the OFT to issue an order banning unfit persons from practising. It will affect both individuals and companies. This is vitally important. It is a major tool, in the hands not just of consumers, but the regulator and those in the industry who want to operate in market in the sure and certain knowledge that they are not competing against dodgy characters in dodgy companies with dodgy practices, but in an open and fair way, providing excellent and transparent services for the consumers who want to use their company for the purpose of buying and selling property.
We want to ensure that consumers have access to redress for complaints against estate agents related to home buying and selling. Having an ultimate sanction of losing your livelihood should ensure that estate agents comply with the obligation to belong to a redress scheme. That goes back to a point that my hon. Friend the Under-Secretary of State for Trade and Industry made earlier. My hon. Friend the Member for Ealing, North also alluded to this. There are those out there at the moment who believe that they can operate with impunity and consequently do quite significant damage to individuals who wanted them to provide a first-class service. That can range from a very big problem to a small problem and nothing seems more challenging in terms of one’s mental well-being than buying or selling a property. We all know what I am talking about.
New clause 2 seeks to increase the regulation of estate agents beyond what is proposed in the Bill and seeks to introduce bureaucracy where I do not think it is necessary. The Government are going further than any Government before by putting in place redress schemes to act as gatekeepers to the high street. If people are not in it, they cannot practise. That is a big incentive. It is big and legitimate barrier. It is not the kind of barrier that the hon. Member for Hertford and Stortford described. For the first time, every consumer will have the certainty of knowing when they walk into an estate agent’s office, that they have access to redress if something goes wrong. For the first time, every consumer who has been misled about a property will have access to redress. For the first time, every seller who has had an offer withheld will be able to seek redress. For the first time, all consumers who received a bad service, even if an estate agent has not acted illegally, will have access to redress.
This comes to a point that the hon. Lady made in moving the amendment. She asked how someone could tell that they had been badly treated. The Bill will improve the audit trail for transactions by requiring estate agents to make and keep records, including records of offer letters, not for six weeks, six months, or a year or two, but for six years.
The Bill gives the OFT and trading standards officers the powers to go into premises and inspect records in a wider range of circumstances. That will enable them to investigate all breaches of the law and of undertakings given to enforcers, and not just criminal offences. The Bill also expands the circumstances in which the Office of Fair Trading may consider the fitness of an estate agent to practise, and take regulatory action against them. That is in addition to the estate agents regulations 1981 and the Money Laundering Regulations 2003, which also contain a requirement to maintain records, for obvious reasons. This is a huge improvement, even when a consumer does not realise what has happened, and it allows the investigation of the operations of a company that someone has expressed concern about. These audit trails and that information will provide valuable opportunities for trading standards officers and the OFT to investigate complaints, or cases in which there has been a cover-up by an organisation in relation to its relationship with its consumers.

Lorely Burt: I have been listening carefully to what the Minister has said, and I welcome the requirement for estate agents to provide satisfactory and appropriate records for an audit trail. However, a customer still needs to have an idea about whether he or she has been “ripped off”—and I cannot think of a more parliamentary phrase—before anyone investigates a complaint. The point of these new clauses is that they make provision for something like a mystery shopper, so that a company that is systematically misleading customers can be detected; otherwise, it may not be.

Ian McCartney: I am trying to follow the logic of that. How can a regulator, whether working as a trading standards officer, for the OFT or the National Consumer Council, look into the mind of someone who does not know that he or she is being ripped off? I am trying to get my head around that.
Mystery shoppers have many legitimate uses. The public and private sectors use them, and they can be effective. I think that I am a mystery shopper for the national health service, and I have found it most satisfactory so far.

Stephen Pound: The hon. Lady makes an interesting point. I know of three cases in which people have offered their houses for sale through an estate agent and sold them to an apparently legitimate purchaser, but it subsequently transpired that the estate agent was making the purchase through an agent, who happened to be a member of the same fraternal organisation. How would the victim know about that without the sort of protection that the hon. Lady is asking for?

Ian McCartney: I am trying to suggest to you that that is what we are trying to provide in practice. It is not just an audit trail in respect of an individual, but in respect of the whole company. One complaint may be made or one concern expressed, but it is only when the OFT, the trading standards officers, or both get into the company that they can look at the extensive records. At the moment, that is not possible. The activity that my hon. Friend was talking about is already a criminal offence. In addition, there would now be a redress scheme for compensation, and, when someone pleads guilty to such a serious offence, I imagine that the OFT would take action to close the entire business.

Mark Prisk: Without wishing to interrupt the Minister’s flow, I must say that the point here is that, rather than try to second-guess what may or may not be in the mind of a mystery shopper, we should put a system in place that deters those who would behave in that way, whether an estate agency or other business. That would make it crystal clear that these practices are unacceptable, that there is a clear redress scheme, and that there are penalties, which such businesses would rather not face. Therefore, the deterrent element is important. Does the Minister agree?

Ian McCartney: The hon. Member has put it more eloquently than I have managed in the past five minutes, and I thank him. He is absolutely right, and that is why the capacity to establish the records and maintain them is so important as a deterrent. There must be absolute certainty that there is an evidence trail and that it is an offence not to maintain it. Failing to maintain the records in order to try to get away with ripping somebody off or undertaking a dodgy activity would itself be an offence. It might be a serious enough offence for the individuals concerned—separately or collectively as a company—to be prevented from practising. The Government has a big role to play in incentivising industry, in terms not only of good practice and the way in which companies are run, but of how industry increases the skills of its staff. Significant financial pay-outs are at stake—for example, up to £25,000 under the current voluntary scheme—so estate agents would be mad not to take up the proposals.
Professional development schemes for staff, to ensure that standards rise rather than fall, are important and, as the survey published yesterday by Ernst and Young shows, it is in a company’s best interests to deal effectively with customer complaints. That is the key to customer satisfaction. Most companies providing goods and services that do that get a benefit from it. Not only are they well run, but the customers want to buy their goods and services because they are certain that if something goes wrong it will be dealt with.
I believe that that approach will give estate agents the incentive to address not only big issues, such as not passing on offers and lying in respect of properties, which my hon. Friend the Member for Ealing, North mentioned, but service issues, such as not turning up to show people around and not returning keys on time. Consumers will have access to redress for those things too, even if they are not on the scale that would trigger serious enforcement actions or investigations, including criminal investigations.
Slapping on more bureaucracy would be an easy option. Our approach will get the same results without the disadvantages associated with blunt regulatory measures.

Lorely Burt: The key to this is the point that I was struggling to make earlier. When someone wishes to sell or buy a home, they cannot necessarily tell from indications on the high street who has had training and who has not, or who is a member of an appropriate scheme and who is not. Every consumer, whether buying or selling, should be able to expect a minimum standard of service. However, when they walk through the door, there is no way in which uninitiated individuals can tell whether the person whom they deal with has no experience or insurance and does not provide a service that meets specified standards. That is the situation that we seek to address.

Ian McCartney: I understand what the hon. Lady is saying. However, estate agents, whether companies or individuals, must be members of the redress scheme or they cannot practise, so somebody walking throughthe door with a complaint—whether a small one or a major one—will get redress. That does not happen at the moment, except in the context of the recent scheme that will build on good practice. However, the scheme will not cover two thirds of the industry; it will cover all of it. That is important, and it seems to be forgotten when we talk about the positive aspects of licensing. We cannot get more positive in my view than preventing people from practising unless they belong to the redress scheme. Without that, they cannot open their doors, advertise or take in customers. In future, the minute that any of us walks in the door, we will have certainty that the individuals who we are dealing with, as well as the company in which they are employed, must be part of the redress scheme.

Ben Wallace: I understand the Minister’s point and recognise the correct angle of it. Are the Government planning to publish a list, so that people can go online and find out that estate agent X is listed under the redress scheme? If that were the case, we would know; we would be able to check.

Ian McCartney: That information will be available through the Office of Fair Trading and local trading standards offices. It will also include whether regulatory action is being taken against someone, including closing the organisation down. That information will be in the public domain if an offence has been committed, and I thank the hon. Gentleman for raising the matter, which enabled me to make that point.
The OFT report on estate agents looked in detail at licensing them. The OFT unearthed little evidence that competency standards would prevent rogue agents from entering the market. Its findings clearly showed that dodgy dealings are not the result of a lack of qualifications or knowledge, but a lack of integrity in the management and running of the company—a point made by the hon. Member for Hertford and Stortford. That is why the measures are so important as a disincentive and to provide certainty that estate agents will be apprehended if they operate in those ways. If necessary, individuals and the organisation as a corporate body will not be allowed to offer services in what is an effective and lucrative marketplace.
The OFT concluded that licensing estate agents would raise costs for consumers and inhibit competition in the industry, without delivering adequate benefits to justify it. That is why, on an evidence base, the scheme in the Bill was proposed. It has the benefits of being a positive scheme, for which hon. Members have argued, and it has none of the disbenefits. It provides certainty for consumers who come off the high street and seek an estate agent’s services.
We are confident that requiring estate agents to belong to approved redress schemes will improve standards in the industry, but we are not takingany chances. The Bill lengthens the stick as well as introducing a carrot. At the same time as requiring estate agents to belong to an approved redress scheme, we are strengthening the 1979 Act’s enforcement powers. The Bill will ensure that breaches of statutory undertakings and enforcement orders, as well as criminal offences, can result in an investigation of an estate agent’s fitness to practise, which will include its records as evidence. It will enable enforcers to deal more effectively with rogue agents and take them out of the market altogether.
New clause 4 may be dressed up as a lighter-touch regulation, but it just replicates, in a confused way, what is already happening or will happen shortly. First, the 1979 Act already requires estate agents to provide information to the OFT and to trading standards officers. As I have explained, the Bill will extend those powers, so that trading standards officers can require information to investigate a much wider range of wrongdoing—a point made by the hon. Lady. If an agent fails to provide that information, the OFT will be able to consider that person’s fitness to operate as an estate agent, and it could lead to it ultimately banning him or her from practising. Their ability to hide their wrongdoing by not supplying their records would be a disastrous strategy if they tried to deploy it. They would end up with the same result at an earlier stage and simply be banned from practising. The threat of a banning order is a more serious deterrent than the fine of £5,000 proposed in new clause 4.
Secondly, the OFT already has a statutory duty to keep the estate agency market under review, as required under section 25 of the 1979 Act, and has a unit dedicated to investigating complaints against estate agents and taking enforcement action. It is a matter for the OFT how it carries out those functions and is not something that needs to be set out in statute.
Thirdly, if the OFT wishes to require all estate agents to register with it and to charge a fee for doing so, it will be able to do so under the third money laundering directive that will be implemented in the UK in December. As the hon. Lady said, the OFT has the capacity under that directive to take action if it wants to do so. It is an independent regulator, and it is for the OFT to make that decision.
Finally, I fail to see any benefit whatsoever in getting estate agents to certify that they comply with legislation or a code of practice. They are already required to comply with the Estate Agents Act 1979 and other legislation, such as the Enterprise Act 2002. Knowing that consumers can bring complaints to an independent ombudsman is much more of an incentive to raise standards than making an empty promise.
A serious set of arrangements therefore protects access to the market for legitimate estate agents. Not just in individual cases, but when there is a lack of integrity, it provides an opportunity for regulators—either local regulators or the OFT—to investigate appropriately and to use the records to do so. Regulators can look at the level of offences taking place, not just significant offences with the capacity for criminal investigations, but the small, niggling problems that make people’s lives an absolute misery when trying to buy and sell property. We will deal with those problems as well.
The Bill is the right way forward. Making estate agents belong to a redress scheme will raise standards; enforcers will have the powers needed to catch the minority who continue to rip off people. That is why I reject the hon. Lady’s proposals and hope that my explanation has helped her to understand how effective the scheme will be.

Lorely Burt: The Minister is being extremely patient with me. I want to raise a point that I did not catch in his remarks. I am sure that the fault is mine, because I alluded to it only fairly briefly: new clause 2 would broaden the scope of the Bill to include lettings. I am very concerned because of developments in the market—I let out properties myself—and it would be of great benefit if the scope of the Bill could be broadened to include lettings, as there are many similarities. Before he concludes his remarks, would he care to comment on that?

Ian McCartney: That issue will come up later today, so I shall leave my remarks on it until then. I think that it will be a sparky debate by all concerned. That was not meant to be threatening, but there is a genuine debate to be had about the best way forward, as there was on the matter just discussed. I look forward to that and apologise to the hon. Lady, but let us keep our powder dry.
An estate agent will have to provide consumers with the details of the redress scheme to which they belong. In my view, they must therefore provide such information on their premises, so that when people enter to seek to use the estate agent, they can find out which redress scheme the agent is a member of. That is important.
 If a consumer complains to trading standards or the OFT, the latter will check immediately whether the agent is a member of a redress scheme. If they are not, it will take enforcement action against them. Let us say that someone walks off the high street and into a company’s premises and says, “I want to buy a property in this area. Are you a member of a redress scheme?”, and the company replies, “Yes, here are the details.” If an issue arises at some point, and the consumer goes to trading standards or the OFT and is told, “Well, actually they are not a member of that scheme”, under the Bill, trading standards or the OFT do not have to wait; they can take immediate action.
The consumer will suffer no detrimental effects. People can say, “I am sorry about that, but they should have been a member of a redress scheme”. That is a big incentive for and signal to those who want to act improperly. They will not be able to do that anymore. At every level of their engagement with the consumer, the consumer will be protected, and if the organisation wants to hide impropriety, it will not get away with it, because the records will provide a significant audit trail, not just of individual cases, but of the management and running of the business as a whole.
I hope that the hon. Lady understands what weare trying to do: inventive positive licensing plus, if Members do not mind me putting it like that, to protect those in the marketplace operating effectively, to allow legitimate businesses into the marketplace and to provide no hiding place for rogues who want to rip off customers.

Lorely Burt: I have listened very carefully to the points that the Minister has made, and I am intrigued by the expression, “positive licensing plus”. I look forward to further discussions on that concept. I understand completely that his primary motivation is the protection of the consumer. Having said that, however, new clause 2 in particular is supported fully by the National Association of Estate Agents. I am not convinced that the Government—

Stephen Pound: I am sorry; I did not mean to interrupt the hon. Lady in the middle of her sentence, but I thought that she might be drawing her peroration to a conclusion.
The hon. Lady refers to mystery shoppers. Like a lot of people who consider the matter open-mindedly, I find that an extremely attractive and sensible option. Before she winds up, will she give some indication of the extent of mystery shopping as she envisages it? Surely, she is not anticipating an entire purchase and sale of a property being undertaken by a mystery shopper. Does she imagine that someone will simply inquire at an estate agent’s? What will be the limit of the mystery shopper’s participation in the process? I am very much attracted to the proposal.

Lorely Burt: I am very grateful to the hon. Gentleman for his interesting and supportive remarks. Perhaps I can direct him to the Which? report entitled “Move it”, for which such an exercise was undertaken. I do not feel that I have the qualifications to specify how it would take place, but people with a great deal more expertise could recommend how it should be done.

Ben Wallace: I am sorry to interrupt the “happy shopper” debate. Does the hon. Lady accept that, whatever consumers purchase, they are already protected to some extent by the Consumer Protection Act 1987? Plenty of avenues are open to consumers, even without the protections in the Bill, which the hon. Lady is understandably keen to reinforce.

Lorely Burt: I am very grateful to the hon. Gentleman for pointing out that true and relevant fact.
The new clauses have prompted a useful, interesting and appropriate debate. I shall not press them, but the Minister might see something similar to them appear at a later stage.

Question put and agreed to.

Clause 53 ordered to stand part of the Bill.

Schedule 6

Estate Agents’ Redress Schemes

Lorely Burt: I beg to move amendment No. 23, in schedule 6, page 62, line 29, leave out ‘may’ and insert ‘shall’.
The amendment is another rehearsal of discussions that we have previously had and would strengthen the demand upon the Secretary of State, who is not required to do any of the things in the schedule. The argument is in a sense tautological: we wish him to be required to undertake the matters referred to.
 Stephen Pound rose—

Michael Weir: Order. Amendment proposed, in schedule 6, page 62, line 29, leave out ‘may’ and insert ‘shall’.

Stephen Pound: I apologise for my premature rising, Mr. Weir.
The hon. Lady’s amendment has stimulated me to delve deep within the entrails of proposed newsection 23A(1) of the Estate Agents Act 1979, particularly the use of the word “complaints.” When my right hon. Friend the Minister responds, will he comment on third-party complaints? I raise thatpoint because, like many Members, I am constantly approached by aggrieved constituents complaining about the proliferation of sale boards. In many cases, there is a veritable forest of them.
I have discovered that, in a number of cases, estate agents place boards on properties in which they currently have no interest but may at some stage. Inmy constituency, on the corner of Ruislip road and Rectory Park avenue, there is an absolute forest of boards, providing a windbreak if anyone happens to be playing football behind it. If one wishes to complain, there is no obvious direct first or second-party complainant, because the boards are on the corner of the road, so we come to a stage at which there must be a third-party complainant.
My public-spirited constituent, Tessa West, has drawn to my attention a problem in Queen’s walk in Ealing, where an estate agent has placed a board outside a property on the assumption that they may have an interest in disposing of that property at some point in the future. Like all people of good will, I look to my right hon. Friend the Minister to resolve such problems in the style for which he is so well known.
I should like to discover whether there is some way in which we can consider third-party complaints, particularly in respect of sale boards. I have pursued such a case through the small claims court, and I was told that the damage done to a property by the affixation of a sale board was so minimal that there could be no claim in law. The estate agent was then required to take down the board within 21 days, which gave them 21 days of free advertising.
In such a massive industry—agency charges in England and Wales are about £3 billion a year—there is inevitably great pressure on estate agents to get their name into the public domain. I am concerned that in some cases, keen and hungry estate agents, who are not necessarily unscrupulous, use the entirely legitimate sale board in an illegitimate way.
When my right hon. Friend sums up, will he offer some comfort to the many people, such as my constituent, Tessa West, and, I am sure, many hon. and right hon. Members, who suffer in that way and do not see an obvious remedy? Local government planning law does not apply, because a board is a temporary structure. There appears to be some size regulation in the industry, so it is not as though estate agents produce massive billboards, which could be a hazard under highway legislation. Such use of sale boards is certainly a nuisance, however; it is sharp practice and something that we could address, even though in the grand scheme of things, it may seem small potatoes.

David Gauke: The hon. Gentleman makes a useful point, but I have one concern with the direction in which his argument is running. In my constituency, for example, local primary schools advertise their fairs in conjunction with local estate agents. Throughout the village in which I live, Chorley Wood, one sees what appear to be estate agent boards that are in fact advertising fairs for local primary schools. That is quite helpful to those schools; I am sure that the hon. Gentleman would not want to suggest anything that would make such advertising more difficult.

Stephen Pound: The hon. Gentleman makes an extremely important point. In my constituency, Robertson Smith Kempson, an admirable estate agent, supports Hobbayne primary school, which is an excellent school round the corner from where I live. We are delighted to have those notice boards up for a couple of days. My concern is that when, as in one case, there are 11 different sale boards clustered outside an obviously not very desirable property—

Tobias Ellwood: Next door to you.

Stephen Pound: I am actually referring to my property.
That brings not into disrepute not only the profession, but the activities of those public-spirited school governors who are trying to make a few bob for their school fete. This issue has become more than an irritant, and I see no sanction or redress in law, because compliance normally carries a 21-day time frame, which is beneficial to the advertisers. I finish by looking with hope and expectation to my right hon. Friend the Minister, who never disappoints, and I am sure that he will not do so on this occasion.
Debate adjourned.—[Steve McCabe.]

Adjourned accordingly at twenty-four minutes past Twelve o’clock, till this day at Four o’clock.